Answer: As the loan is amortized, Boris will make a series of equal payments each month for the duration of the loan, with each payment comprising of both interest and principal. The amount of interest in each payment will decrease over time, while the amount of principal in each payment will increase.
To calculate the monthly payments, we can use the formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1]
Where:
M = monthly payment
P = the principal or the loan amount = 91500
i = interest rate as a decimal = 3.3%/12 = 0.00275
n = total number of payments = 40 years x 12 months/year = 480
By substituting the values in the formula:
M = 91500 [ 0.00275 (1 + 0.00275)^480 ] / [ (1 + 0.00275)^480 - 1]
M = $439.65
So the monthly payment that Boris will make is $439.65. This amount will stay the same throughout the loan term, but the proportion of interest to principal in each payment will change as the loan is amortized.
Explanation: